What Is a Cost Sheet?

A cost sheet is a detailed statement representing the many costs involved in an organization or business. Just like an expense sheet, the cost sheet is a document where you can compute the total cost of a business budget, the incurred cost of every service or product unit in periods, and more. And instead of having different sheets to use for every type of expenditure, the cost sheet compiles all costs presented in a table form.

Did you know that there are four main components of a cost sheet? These are the prime cost, works cost, production cost, and total cost.

The Core Four: Elements of a Cost Sheet

According to The Investors Book, a cost sheet consists of four major elements. These are the prime cost, works cost, cost of production, and total cost. But what exactly are they? In this section, you will be introduced to each cost sheet component.

Prime Cost: Prime costs refer to the initial costs specifically for manufacturing items like labor costs, raw materials, and similar production-driven budgets. And its standard formula is Direct Material + Direct Labor + Direct Expenses = Prime Cost.Works or Factory Cost: Works cost summarizes the prime cost along with factory overheads and altering the opening and closing stocks in progress. Hence, the formula is Prime Cost + Factory Overhead + Opening Stock of Work in Progress – Closing Stock of Work in Progress = Works Cost. But if the factory overhead is the concern, you will have to add the indirect material, indirect labor, and indirect expenses.Cost of Production: All direct and indirect costs will be covered under production cost. The same goes for the material, labor, and related costs. Therefore, you add the works cost and the administration overhead to calculate the cost of production.Total Cost: The last value to solve for a product or service is by adding the selling and the distribution budgets to the production cost of the items sold. But when you already know the product or service’s sales price, simply use the formula Sales – Total Cost = Profit.

How to Make a Cost Sheet

While you already know the cost sheet’s definition, components, and inherent formulas, apply your knowledge further in creating the cost sheet yourself. First of all, you won’t find the work a hassle because sample templates are available to accommodate you anytime. Just pick a sample cost sheet to customize and you can produce as many sheets as you want within minutes. And to ensure your sheet is properly made, follow these steps:

Step 1: Brainstorm All the Costs Involved

Identify all the costs in your business, project, or operation. You could focus on your main goal or type of business in case you run a food business, retail, or even construction. It is expected that your sheet contains a list of accumulated costs, like price lists, including the direct costs, raw materials, labor costs, and more. Any example where budget is concerned shall be identified until you can compile them all to your cost sheet.

Step 2: Present Clear and Organized Details

A messy cost sheet won’t help you effectively. You have to write properly and organize your details really well. Imagine trusting on one document that contains all the important costs of your business yet you hardly understand its details. That is a no-no. You can keep it simple actually. The key is to divide your costs into their types and categories. You may also set automatic calculations and formulas so it won’t be difficult to update the costs. Nonetheless, always go for the easy-to-follow structure.

Step 3: Personalize the Cost Sheet

Make the cost sheet your own. Or perhaps, you make it as your company’s by incorporating your business logo, theme colors, and branding. Changing the format and design is even something you can do in using the sample cost sheets above. That way, you come up with formal or credible results.

Step 4: Finalize the Output and Update It

When you are confident with the cost sheet’s content and results, focus on the format for its output. Do you plan to use MS Word or PDF cost sheets? And do you like a soft copy version or a printed sheet? Decide now. Lastly, update your cost sheets regularly as there may be changes with the costs from losses, profits, and other necessary alterations.


Why is a cost sheet essential?

Cost sheets are important because they help you control and monitor your business expenses, as well as the costs of every good or service in your operations. A cost sheet even lets you trace numerous cost components at varying stages from production, manufacturing, selling, distribution, etc.

What are the types of a cost sheet?

Cost sheets have two major types. The historical cost sheet and the estimated cost sheet. And from their names alone, you can understand their differences. The historical cost sheet covers costs that were already experienced. Meanwhile, an estimated cost sheet is prepared early and it focuses on estimates; thus, costs aren’t actually experienced yet.

What are other advantages of a cost sheet?

There are plenty of things you can do with cost sheets. And some of its benefits are the following:

  • Decides the proper selling prices of goods and services
  • Adjusts the opening and closing stocks
  • Documents the official cost statement
  • Provides every product or service’s per-unit cost
  • Helps compare the estimated and actual costs incurred

Material costs, shipping fees, taxes, labor costs, outsourced supplies, tools and equipment expenditures—there are literally a lot of costs to cover in a standard business. So as every expense increases and more expenditures must be monitored, it gets arduous to keep track of all different costs. Well, not anymore as you use professionally-made sample cost sheets. Download now!